Stocks Tracker: M&A makes the world go round in jumpy June

Entain

1 June closing: 1,319p

30 June closing: 1,272p

Peak June closing: 1,328p

Entain may well have been forgiven for thinking that its successful strategy of cherry-picking local hero operators via a well-maintained and pretty consistent M&A pipeline would have been music to shareholders’ ears. Moves in Portugal, Croatia and the Baltics have all bolstered the group’s geographic footprint and kept revenue ticking up over the years. Yes, a lot of attention is on its JV in the US with MGM Resorts, but there are still success stories back in Europe. It is in this vein that the FTSE 100 firm pushed the go button on a £750m move for Polish market leader STS on Tuesday 13 June, with the announcement coming post-market close.

The deal will see Entain acquire 100% of the Warsaw-listed company, valuing it at £4.75 a share, representing a significant premium of 35% on the six-month volume-weighted average share price. Entain expects the deal to be earnings accretive in its first full year of ownership while it is looking to generate £10m in synergies. With STS having carved out a dominant position in a difficult Polish market, amid tax and grey market concerns, the move looks to be a shrewd one and was supported by Regulus Partners as a “high-quality, low-risk deal at a win-win price”.

However, the market wasn’t as positive on the news. Entain’s share price slipped from a previous close of 1,321.50p to close out at 1,206.50p on Wednesday 14 June. It has proven to be a significant blow for the firm as it has failed to regain its foothold in the proceeding weeks, with a monthly low of 1,202p on Thursday 15 June.

Things got heated 24-hours later when US shareholder Eminence Capital said it was “outraged” at the company’s move for STS.

The group said: “The market reaction to this equity offering should be a wake-up call to Entain’s tone-deaf board and management team.

“As shareholders lose confidence in Entain’s ability to allocate capital and create long-term value, it is quite likely they will support a sale of the company to MGM at a materially lower price than previously assumed.”

DraftKings

1 June closing: $24.66

30 June closing: $26.59

Peak June closing: $26.54

After Jason Robins and his senior leadership team cashed in on a strong share price performance in May, netting a combined $37.5m in the process after disposing of 1.5 million shares, June saw the Boston-headquartered firm’s stock continue to rise. A continued strong performance in its home state of Massachusetts has been well-received while the first half of the month was a relatively low-key affair for the operator.

However, on Friday 16 June, the firm rocked the boat with a $195m non-binding offer for PointsBet’s US division. The move put DraftKings in direct competition with Fanatics Betting and Gaming, which had seemingly sewed up a $150m move for PointsBet’s US arm and tech in May. Despite sending shockwaves following the bid, the US market would open on the following Tuesday due to the Juneteenth federal holiday, with DraftKings’ share price having slipped from $24.66 to $24.58. The firm’s share price did tick up, with PointsBet prepared to engage with the offer despite having recommended that its shareholders approve the previous bid from Fanatics. However, DraftKings is understood to have not met PointsBet’s terms to firm up its proposal and missed a subsequent deadline.

In the latest twist, Fanatics upped its bid for assets by $75m to $225m on Tuesday 27 June. Despite DraftKings losing out, it has seen its share price tick up during the final week of the month. Missing out on PointsBet US would have been a far greater blow for Fanatics, with the deal providing market access in 15 states (which DraftKings wouldn’t require) and tech capabilities, including that of Banach Technology, which was DraftKings’ assumed target to build on its in-house capabilities.

PointsBet

1 June closing: A$1.32

30 June closing: A$1.79

Peak June closing: A$1.79

From the courter to the courted, PointsBet has seen its share price jump 32% in June thanks to DraftKings’ late interest in acquiring its US assets. With the group looking to ditch its US-facing business due to soaring costs and tough competition, Fanatics swooped in to snap up the business. All seemed to be proceeding smoothly in the build up to a PointsBet shareholder meeting where the deal would be ratified, until DraftKings put the fox among the pigeons with its 11th-hour bid.

And while DraftKings’ share price failed to shoot up on the back of its attempted M&A move, PointsBet saw its stock increase from a close of A$1.37 to A$1.66 on Monday 19 June. The potential of having the assets stolen from under its nose saw Fanatics add an extra sweetener in the shape of a $75m top up on its original offer. As mentioned previously, this will see the nascent operator kickstart its US sports betting aspirations once the deal finally completes.

For PointsBet, having ordered the postponed trading of its shares from Tuesday 27 June ahead of the confirmed sale, focus will now shift to its Australian business. A capital injection may allow it to realign focus on its home market, however third parties have been hovering for its Australian assets, although no transaction has reached critical mass at the time of writing.